Neo Performance Materials stock has bottomed, Paradigm says

Following the company’s fourth quarter results, Paradigm Capital analyst J. Marvin Wolff has maintained his “Buy” rating on Neo Performance Materials (Neo Performance Materials Stock Quote, Chart, News, Analysts, Financials TSX:NEO).

On March 18, NEO reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $20.7-million on revenue of $134.9-million, up from $128.7-million in the same period a year prior.

“Neo delivered outstanding financial and operational results in 2024, exceeding guidance with adjusted EBITDA growth of over 70 per cent, driven by strong performance in rare metals and Magnequench,” CEO Rahim Suleman said. “We successfully executed major capital projects, including completing our emissions control catalyst facility on time and under budget. Our European permanent magnet facility remains on track for a grand opening in 2025, marking a significant step forward in strengthening our global supply chain for permanent magnets.”

Wolff, who in a research update to clients March maintained his “Buy” rating and price target of $13.80, says savvy investors should be scooping up shares of NEO right now.

“NEO’s traditional business lines are normalizing and management is streamlining operations,” he wrote. “We use 8x EV/EBITDA and a 10% discount rate to value NEO’s traditional business, which gives us a valuation of $11.50, on 2026e EBITDA of $72.4M (unchanged). We also add the value of the traction motor business as NEO has a delivery contract in hand (Figure 5). We use 2031 as the valuation point as EV adoption has pushed out timeframes. We value the traction motor business at $2.33/sh, giving us a target price of C$13.80 (unchanged). Shares are trading at 0.61x BV and yield 5.0%. We reiterate our Buy rating. We are of the view that at these exceptionally attractive low valuations this global leader in rare earths and magnetics should be appealing to strategic entities. We believe that NEO’s share price has bottomed.”

The analyst thinks the company will post EBITDA of (All figures USD) $56.1-million on revenue of $492.7-million in fiscal 2025. He expects EBITDA of $72.40million on revenue of $455.2-million in fiscal 2026.